Two-Judge Bench in ABL International Ltd. v. Export Credit Guarantee Corporation of India, (2004) 3 SCC 553 analyzed a long line of precedent [K.N. Guruswamy, AIR 1954 SC 592; Gujarat State Financial Corporation, (1983) 3 SCC 379; Gunwant Kaur, (1969) 3 SCC 769] to conclude, Writs under Article 226 are maintainable for asserting contractual rights against the State, or its instrumentalities, as defined under Article 12. This exposition has been followed by this Court and has been adopted by Three-Judge Bench decisions.
The presence of an Arbitration Clause within a contract between a State instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226 [Harbanslal Sahnia, (2003) 2 SCC 107; Ram Barai Singh, (2015) 13 SCC 592].
While exercising its jurisdiction under Article 226, Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard. It cannot be ousted only on the basis the dispute pertains to the contractual arena. This is for the simple reason, the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract.
– Hon’ble Justice Dr. D.Y. Chandrachud, Unitech Limited v. TSIIC, [Civil Appeal No. 317 of 2021].